Citation Facts Judgment
Caparo Industries Plc v Dickman (1990) 2 AC 605 Caparo relied on the audited financial statements of a publicly listed company to purchase additional shares with a view to affecting a takeover. Caparo alleged the auditors (Touche Ross – now Deloitte) were negligent in certifying that the financial statements showed a true and fair view of the company’s position.
The issue before the House of Lords was whether the auditors owed a duty of care to individual shareholders. The House of Lords unanimously held that the auditors of a public company did not owe a duty of care to individual shareholders in a company or prospective shareholders.
Bridge LJ (at 618):
In addition to the foreseeability of damage, necessary ingredients
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If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice.
The judgments of Dawson J and Toohey & Gaudron JJ indicate that a duty of care in such cases requires a relationship of proximity between the plaintiff and defendant. Toohey and Gaudron JJ’s finding of no duty hinged on their view that Esanda did not need to rely on Peat Marwick’s audit and could have instead hired accountants itself to ascertain the borrower’s true financial position (at 289). This reasoning is difficult to apply to individual shareholders in a publicly listed company.
McHugh J at 282 held that the Australian law was correctly stated and applied in R Lowe Lippman (above). McHugh J also suggests that
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The HCA has unanimously held at 579 [49]:
What has been described as the three-stage approach of Lord Bridge of Harwich in Caparo Industries Plc v Dickman does not represent the law in Australia. Lord Bridge himself said that concepts of proximity and fairness lack the necessary precision to give them utility as practical tests, and “amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope”.
The judgment instead emphasises the importance of developing novel duties by reference to principles of general application (at [49]) and ensuring that any new duties imposed are consistent with parties’ existing obligations (at [60]).
The HCA did not make any comments on the correctness of the ultimate finding in Caparo that auditors did not owe individual shareholders a duty of
The Plaintiff contests that orders to restrain the Plaintiff’s land use [8] by Pain J in the Land and Environment Court of NSW in 2005 constituted the ‘violation of correct legal procedures’ [14] and hence professional negligence, because the case was previously dismissed by Lloyd J [5].
Analyze Luxford & Anor v Sidhu & 3 others [2007] NSWSC 1356 (3 December 2007) as follows:
Judge Tracey also quoted Wu Yu Fang & 117 Ors v The Minister for Immigration and Ethnic Affairs & Anor and Onea,
Case Comment: John Michael Malins v Solicitors Regulation Authority [2017] EWHC 835 (Admin) 2017 WL 01339062
The purpose of this paper is to evaluate the legality and ethicality of the corporate governance activities that occurred in an ethics case presented in the text. The paper will provide relevant details regarding the legality of the activities, the criteria by which Sarbanes-Oxley would apply to this case, the ethicality of the activities, whether or not the activities were equitable to internal and external stakeholders, and the next steps representing best interest of all stakeholders.
Barnes, separately, had commenced proceedings in the District Court of NSW. Both proceedings were transferred to the Federal Court and heard with the proceedings issued by the ACCC. The judgment on this case was delivered on February 27, 1998 six years after Australia passed a statutory code dealing with defective goods in 1992 sixty years after the verdict on the Donoghue v Stevenson’s case.
This case established that an auditor could be sued by a primary beneficiary for damages from negligence. A primary beneficiary is a party that has a direct benefit from the audit. Non-privity parties could also sue for gross negligence. This increased the auditor’s legal exposure to third parties. The SEC of 1934 reflected these changes and many others; one significant change was that auditor’s had a much higher litigation risk due to their new responsibility to third parties.
The Oxford Learner’s Dictionary defines fairness to be ‘the quality of treating people equally or in a way that is reasonable’ and justice as ‘the quality of being fair or reasonable’ (Oald8.oxfordlearnersdictionaries.com, 2014). Investigation of the characteristics of the Australian Legal System (ALS) including its adoption, structure and operational rules, reveal that for the most part the system is based on these two attributes. This inference is further evidenced by the legally binding operational framework assigned to the financial services industry and reflected in the codes of practice that also guide it.
Precedents have played a significant role construction and transformation public policy over time. The concern that judges face is whether establishing a new duty of care will influence public policy. This is the issue that results from in the Cooper v. Hobart case. The judge constructed a final decision that Hobart did not owe a duty of care to Cooper due to explanations that are delineated in public policy. This essay will discuss in favour of the judge’s decision for the reason that establishing a new duty of care would have conflicted with existing public policy. Initially, I will be providing a concise summary about the case of Cooper v Hobart. This involves the facts, issues and ratio. Then, I will elucidate what the Anns test is
Of these transactions, most of it was not in the interest of Enron of Enron’s shareholders; such as profits and cash flows were manipulated and grossly inflated which caused misleading to the investors. AA has also failed to recognise the Generally Accepted Accounting Principle (GAAP) – which is accounting rules used to prepare, present and report financial statements for a wide variety of entities used in United States. AA also did not advise Enron’s audit committee that Enron’s CFO – Andrew Fastow – and his helpers were involved in significant conflict of interests. Enron’s politics and internal control was also found out to be inadequate to protect the shareholders interests. These should have made known and clear as these are responsibilities of an auditor. AA has also make the mistake by which it did not act upon evidence found or neither has it find any audit evidence relating to the numerous share rights transferred to SPEs and the side deals between Enron and banks which remove the banks’ risk from transactions. In auditing, audit documentations are key part to the audit processes.
In the Enron case, The Securities and Exchange Commission (SEC) and Congress conducted an investigation into Enron's collapse. The authorities re-examined the roles of corporate watchdogs, including corporate boards of directors, auditors, investment banks, credit rating agencies and lawyers. It could be that the watchdogs had too tight relations with the company's executives. That is why no one questioned the Enron's aggressive accounting strategies. To prevent such collapses, someone needs to look into the possible conflict of interest. The dilemma is that auditors should perform in the interests of the investors, but they are paid by the audited company, which makes it more difficult for them to exercise tough decisions. The auditors should not perform some particular consulting services for the firms that they audit. Another belief is that there should be more severe consequences for those committing financial crimes and causing fall of the companies.
“Concise and clear pleadings are vital to the administration of justice. No party should be called upon to answer or defend the redundant, jumbled and cryptic pleadings filed by plaintiff’s counsel, and no court should be forced to expend so much time and energy attempting to decipher them.” Id. at 949.
For instance, the funds owed the company by the Rigas family went undisclosed in the statements, because the management at Adelphia deemed such disclosure as being “unnecessary” (Barlaup, Hanne, & Stuart, 2009). Given that Adelphia was a publicly traded company, the purposeful non-disclosure caused potential investors to rely on financial records that were grossly misleading. The inevitable result was the investors continued to inject money into a company that had all the appearances of profitability and sustained growth, but that was, in reality, rapidly becoming insolvent. Moreover, lending institutions also relied on the “independently-audited” financial statements, and they were more than eager to loan the company money, given Adelphia’s presumed state of financial “profitability.”
The case was brought forward to the NSW Supreme Court in 2001 whereby Judge Hulme ordered both Respondents as negligent. This decision was reversed by the Supreme Court of Appeal whereby the judgement was granted in favour of the Respondents. This case affirms the previous decision.
The common law duty of care was established in Donoghue v Stevenson [1932] AC 562 (HL) and refined in Caparo Industries plc v Dickman [1990] 2 AC 605 (HL). Any party including public authorities may owe a duty of care to another if particular conditions are fulfilled. The Caparo conditions apply to public bodies in respect of whether it is fair, just and reasonable to impose a duty of care on their actions.